Pool Configuration & Parameters

Every Knox pool is configured with a set of parameters that define its risk profile, duration, fee structure, and collateralization requirements.

Core Parameters

Rate Configuration

rSenior

• Type: uint128 (basis points)

• Range: 0.50% - 20.00% (50 - 2000 bps)

• Description: Guaranteed annualized return for the senior tranche

• Example: rSenior = 500 means 5.00% APY

• Impact:

  • Higher senior rate → Less yield left for spectrum/junior

  • Lower senior rate → More yield available for risk tranches

rMaxSpectrum

• Type: uint128 (basis points)

• Range: (rSenior + spectrumGridStep) - 50.00% (5000 bps)

• Description: Maximum APY cap for the highest spectrum tranche

• Constraint: Must be greater than rSenior

• Example: With rSenior = 500 (5%), rMaxSpectrum = 2000 (20%)

• Impact: Defines the upper bound of the spectrum grid

spectrumGridStep

• Type: uint128 (basis points)

• Range: 0.25% - 5.00% (25 - 500 bps)

• Description: APY increment between spectrum grid points

• Constraint: (rMaxSpectrum - rSenior) must be evenly divisible by spectrumGridStep

• Example: With rSenior = 500, rMaxSpectrum = 1000, gridStep = 100:

  • Available rates: 6%, 7%, 8%, 9%, 10%

• Impact:

  • Smaller step → More granular risk selection (more possible tranches)

  • Larger step → Coarser grid (fewer tranches, simpler waterfall)

Grid Size Formula:

numGridPoints = (rMaxSpectrum - rSenior) / spectrumGridStep

Example Grids:

rSenior	rMax	Step	Grid Points	Tranches
3%	10%	0.5%	14	3.5%, 4.0%, ... 10.0%
5%	20%	1.0%	15	6%, 7%, ... 20%
2%	8%	2.0%	3	4%, 6%, 8%

Period & Timing

dPeriod

• Type: uint128 (seconds)

• Range: 7 days - 365 days (604800 - 31536000 seconds)

• Description: Pool duration from deployment to maturity

Common Values:

• 30 days: 2_592_000

• 90 days: 7_776_000

• 180 days: 15_552_000

• 365 days: 31_536_000

Impact:

• Longer period → More compounding, higher absolute returns

• Shorter period → Less time risk, faster capital turnover

Maturity Calculation:

maturityTimestamp = tStart + dPeriod

Compounding Effect (5% APY):

Period	Holding Full Period	Absolute Return
7 days	7/365 = 1.92%	0.096%
30 days	30/365 = 8.22%	0.41%
90 days	90/365 = 24.66%	1.23%
365 days	100%	5.00%

Fee Configuration

cProtocolFee

• Type: uint128 (basis points)

• Range: 0.00% - 30.00% (0 - 3000 bps)

• Description: Fee on total pool yield, collected at settlement

• Default: Typically 5-10% (500-1000 bps)

Calculation:

totalYield = max(0, withdrawnAssets - totalDeposits)
protocolFee = totalYield × cProtocolFee / 10000

When Applied: Only if factory.applyProtocolFees() == true (global switch)

Impact:

• Fee reduces distributable amount before waterfall

• Effectively borne by riskiest positions (spectrum/junior)

• No fee if pool has no profit

Example:

• Deposits: $1M

• Withdrawals: $1.1M

• Fee: 10% (1000 bps)

• Protocol takes: ($1.1M - $1M) × 10% = $10k

• Distributable: $1.09M

protocolFeeBeneficiary

• Type: address

• Description: Receives protocol fees at settlement

• Set At: Pool deployment (parameter to SpectrumFactory.deploy())

Collateralization

cCollateralFactorFirst

• Type: uint128 (basis points)

• Range: 5.00% - 100.00% (500 - 10000 bps)

• Description: Collateral factor for the first (lowest) spectrum grid point

• Meaning: Percentage of spectrum value pledged as backing for senior deposits

• Example: cCollateralFactorFirst = 5000 (50%)

  • $100 in the 5.5% spectrum tranche backs $10 of senior deposits

• Impact:

  • Higher CF → More senior capacity per unit of spectrum

  • Lower CF → Safer for spectrum holders (less loss absorption)

cCollateralFactorJunior

• Type: uint128 (basis points)

• Range: cCollateralFactorFirst - 100.00% (10000 bps)

• Description: Collateral factor for junior tranche (and upper bound for interpolation)

• Typical Value: 100% (10000 bps)

• Meaning: Junior pledges entire value as senior backing

• Constraint: Must be ≥ cCollateralFactorFirst

• Example: cCollateralFactorJunior = 10000 (100%)

  • $100 in junior backs $20 of senior deposits (at 5% senior APY, 365d period)

Collateral Factor Interpolation

Spectrum tranches between first and junior have CFs interpolated linearly:

CF(position) = cCollateralFactorFirst + ((cCollateralFactorJunior - cCollateralFactorFirst) × position / numGridPoints)

Where position is 0-indexed (0 = first spectrum, N = last spectrum before junior).

Example:

• cCollateralFactorFirst = 5000 (50%)

• cCollateralFactorJunior = 10000 (100%)

• Grid: 5.5%, 7.5%, 9.5%, 11.5%, 13.5% (5 tranches)

Tranche	Position	CF Calculation	CF
5.5%	0/4	50% + (50% × 0/4)	50%
7.5%	1/4	50% + (50% × 1/4)	62.5%
9.5%	2/4	50% + (50% × 2/4)	75%
11.5%	3/4	50% + (50% × 3/4)	87.5%
13.5%	4/4	50% + (50% × 4/4)	100%

Capacity Constraints

cMaxTotalDeposits

• Type: uint256

• Range: 0 - type(uint256).max

• Description: Hard cap on total pool deposits across all tranches

• Special: If set to 0 at initialization, becomes type(uint256).max (unlimited)

• Example: cMaxTotalDeposits = 10_000_000e6 (10M USDC for a 6-decimal token)

• Impact: Prevents pool from growing beyond manageable size

Senior Capacity (Dynamic)

• Computed: Not a configuration parameter — calculated dynamically

Formula:

seniorCapacity = (Σ(spectrumValue_i × CF_i) + (juniorValue × CF_junior)) × SECONDS_PER_YEAR / (dPeriod × rSenior)

• Recalculates: On every senior deposit, based on current waterfall values

Example (365d period, 5% senior):

Subordinate Tranche	Value	CF	Contribution	Senior Backing
Spectrum 5.5%	$100k	50%	$50k	$50k × 20 = $1M
Spectrum 10%	$200k	75%	$150k	$150k × 20 = $3M
Junior	$300k	100%	$300k	$300k × 20 = $6M
Total			$500k	$10M

Divisor:

dPeriod × rSenior / SECONDS_PER_YEAR = 365 × 0.05 = 18.25 days of senior yield per $1 collateral

Inverted: Each $1 of collateral backs $20 of senior deposits ($1 / 0.05 = $20)

Validation Constraints

At Deployment

// Rate hierarchy
require(rSenior < rMaxSpectrum, "Senior must be below max spectrum");

// Grid divisibility
require((rMaxSpectrum - rSenior) % spectrumGridStep == 0, "Grid must divide evenly");

// Grid step positive
require(spectrumGridStep > 0, "Grid step must be positive");

// Collateral factor ordering
require(cCollateralFactorFirst <= cCollateralFactorJunior, "First CF must be ≤ junior CF");

// Period bounds
require(dPeriod >= 7 days && dPeriod <= 365 days, "Period out of range");

At Deposit

// Total deposits cap
require(totalDeposits + amount <= cMaxTotalDeposits, "Exceeds total cap");

// Senior capacity (senior deposits only)
require(seniorDeposits + amount <= seniorCapacity(), "Exceeds senior capacity");

// Spectrum grid alignment
require(apyBps > rSenior && apyBps <= rMaxSpectrum, "Rate out of range");
require((apyBps - rSenior) % spectrumGridStep == 0, "Rate not on grid");

// No deposits after maturity
require(block.timestamp < tStart + dPeriod, "Pool matured");

Parameter Examples

Conservative Pool

{rSenior: 200, // 2% senior
 rMaxSpectrum: 600, // 6% max spectrum
 spectrumGridStep: 100, // 1% step → 3%, 4%, 5%, 6%
 dPeriod: 15552000, // 180 days
 cProtocolFee: 500, // 5% fee
 cCollateralFactorFirst: 3000, // 30% first spectrum
 cCollateralFactorJunior: 8000, // 80% junior
 cMaxTotalDeposits: 5000000e6 // 5M cap}

Profile: Low-risk, longer duration, heavy senior allocation

Aggressive Pool

{rSenior: 600, // 6% senior
 rMaxSpectrum: 2500, // 25% max spectrum
 spectrumGridStep: 200, // 2% step → 8%, 10%, ..., 24%, 25%
 dPeriod: 2592000, // 30 days
 cProtocolFee: 1000, // 10% fee
 cCollateralFactorFirst: 7000, // 70% first spectrum
 cCollateralFactorJunior: 10000, // 100% junior
 cMaxTotalDeposits: 0 // Unlimited (becomes max uint256)}

Profile: High-risk, short duration, spectrum-focused

Balanced Pool

{rSenior: 300, // 3% senior
 rMaxSpectrum: 1000, // 10% max spectrum
 spectrumGridStep: 50, // 0.5% step → 3.5%, 4%, ..., 10%
 dPeriod: 7776000, // 90 days
 cProtocolFee: 500, // 5% fee
 cCollateralFactorFirst: 5000, // 50% first spectrum
 cCollateralFactorJunior: 10000, // 100% junior
 cMaxTotalDeposits: 10000000e6 // 10M cap}

Profile: Moderate risk, standard duration, fine-grained spectrum grid

Key Takeaways

• Rate hierarchy: rSenior < spectrum_i < rMaxSpectrum, with spectrumGridStep spacing

• Grid divisibility: (rMaxSpectrum - rSenior) % gridStep == 0 enforced

• Collateral interpolation: Linear from cCollateralFactorFirst to cCollateralFactorJunior

• Senior capacity: Dynamic, recalculated on each senior deposit based on subordinate values

• Protocol fee: Only on total yield, global on/off switch via factory

• Period: Fixed duration, compounding pro-rated to holding time

• Validation: Strict at deployment and deposit to prevent misconfiguration